The management at Wells Fargo often portrays its company as a conservative and responsible lender that has
avoided the excesses of subprime lending as evidenced by their relatively strong market position and balance
sheet.1 In reality, the company has profited from originating, purchasing, and servicing a mixed portfolio of
loan products, including both prime and subprime home purchase and refinance loans. While the company
would like to sweep its past subprime lending under the rug, the fact is that during the height of subprime
lending in 2005, Wells Fargo was one of the top ten subprime lenders.2 In 2006, Wells Fargo originated
$27.8 billion in subprime loans, approximately 185,000 subprime home mortgages. This volume of lending
put Wells Fargo in the dubious company of Countrywide Financial, Ameriquest Mortgage Company, and
other, now defunct, subprime specialists
Wells Fargo, and its correspondent lending channels, issued many types of problematic loans that are
now at the center of America’s home foreclosure crisis. Exotic loan products became widespread
throughout the mortgage industry during the period studied in this report (2004-07). Long-term loan
mortgages were originated with a short-term, year-to-year profit mindset. Little to no regard was given to a borrower’s ability to repay the debt obligation. Adjustable rate and other non-traditional loan products also
were utilized to mask a borrower’s actual inability to repay higher debt levels. Unfortunately, the publicly
available data through the Home Mortgage Disclosure Act (HMDA), does not provide information regarding
the types of loans (adjustable rate vs. fixed-rate, for example) made by Wells Fargo. Supporting industry
information, however, points to the fact that Wells Fargo engaged in the kind of irresponsible lending that
has led to the current subprime mortgage crisis.
According to mortgage industry rate sheets, Wells Fargo issued 2/28 Adjustable Rate Mortgages (ARMs)
with a two-year prepayment penalty, making it more costly for borrowers to refinance out of these
ARM loans and into affordable fixed-rate loans. Wells Fargo CEO, John Stumpf, has indicated that
Wells Fargo Financial, the company's consumer finance subsidiary, regularly refinanced debt to subprime
borrowers into ARMs, on the assumption that borrowers would be able to refinance after a short history of
making payments to their ARMs.6 Information from Wells Fargo indicates that 50% of Wells Fargo
Financial's lending was in adjustable rate products. Wells Fargo also issued interest-only loans and “stated
documentation” loans for which a borrower’s income is stated, but not necessarily verified. For both ARMs
and fixed-rate loans, Wells Fargo courted the subprime borrower by allowing loans of up to 100% of home
value for borrowers who had trouble making payments.
A major thrust of Wells Fargo's business was in refinance lending. Wells Fargo was a leader in second lienlending,
ranking 5th in the country in 2007. Refinancing and debt consolidation was big business for Wells
Fargo. It is also an area in which the company has faced charges of predatory lending and charging excessive
fees.8 Wells Fargo originated $4.8 billion in loans, approximately 81,000 second loans, in 2007. Wells
Fargo ranked 2nd overall in “refi” loans, making up approximately 49% of all the bank’s lending from 2004-
07, as reported in HMDA. Even Wells Fargo’s Chairman Richard Kovacevich is on the record admitting that
the bank did too many bad home equity loans in the years leading up to the mortgage crisis
This overview illustrates, cumulatively, that Wells Fargo has not consistently lived by the “longstanding
responsible lending principles” it claims. Wells Fargo was a major subprime lender, used many of the
irresponsible loan products such as ARMs at the heart of the mortgage crisis, and was heavily involved in
lending to already indebted borrowers through its refinance and second lien businesses.
avoided the excesses of subprime lending as evidenced by their relatively strong market position and balance
sheet.1 In reality, the company has profited from originating, purchasing, and servicing a mixed portfolio of
loan products, including both prime and subprime home purchase and refinance loans. While the company
would like to sweep its past subprime lending under the rug, the fact is that during the height of subprime
lending in 2005, Wells Fargo was one of the top ten subprime lenders.2 In 2006, Wells Fargo originated
$27.8 billion in subprime loans, approximately 185,000 subprime home mortgages. This volume of lending
put Wells Fargo in the dubious company of Countrywide Financial, Ameriquest Mortgage Company, and
other, now defunct, subprime specialists
Wells Fargo, and its correspondent lending channels, issued many types of problematic loans that are
now at the center of America’s home foreclosure crisis. Exotic loan products became widespread
throughout the mortgage industry during the period studied in this report (2004-07). Long-term loan
mortgages were originated with a short-term, year-to-year profit mindset. Little to no regard was given to a borrower’s ability to repay the debt obligation. Adjustable rate and other non-traditional loan products also
were utilized to mask a borrower’s actual inability to repay higher debt levels. Unfortunately, the publicly
available data through the Home Mortgage Disclosure Act (HMDA), does not provide information regarding
the types of loans (adjustable rate vs. fixed-rate, for example) made by Wells Fargo. Supporting industry
information, however, points to the fact that Wells Fargo engaged in the kind of irresponsible lending that
has led to the current subprime mortgage crisis.
According to mortgage industry rate sheets, Wells Fargo issued 2/28 Adjustable Rate Mortgages (ARMs)
with a two-year prepayment penalty, making it more costly for borrowers to refinance out of these
ARM loans and into affordable fixed-rate loans. Wells Fargo CEO, John Stumpf, has indicated that
Wells Fargo Financial, the company's consumer finance subsidiary, regularly refinanced debt to subprime
borrowers into ARMs, on the assumption that borrowers would be able to refinance after a short history of
making payments to their ARMs.6 Information from Wells Fargo indicates that 50% of Wells Fargo
Financial's lending was in adjustable rate products. Wells Fargo also issued interest-only loans and “stated
documentation” loans for which a borrower’s income is stated, but not necessarily verified. For both ARMs
and fixed-rate loans, Wells Fargo courted the subprime borrower by allowing loans of up to 100% of home
value for borrowers who had trouble making payments.
A major thrust of Wells Fargo's business was in refinance lending. Wells Fargo was a leader in second lienlending,
ranking 5th in the country in 2007. Refinancing and debt consolidation was big business for Wells
Fargo. It is also an area in which the company has faced charges of predatory lending and charging excessive
fees.8 Wells Fargo originated $4.8 billion in loans, approximately 81,000 second loans, in 2007. Wells
Fargo ranked 2nd overall in “refi” loans, making up approximately 49% of all the bank’s lending from 2004-
07, as reported in HMDA. Even Wells Fargo’s Chairman Richard Kovacevich is on the record admitting that
the bank did too many bad home equity loans in the years leading up to the mortgage crisis
This overview illustrates, cumulatively, that Wells Fargo has not consistently lived by the “longstanding
responsible lending principles” it claims. Wells Fargo was a major subprime lender, used many of the
irresponsible loan products such as ARMs at the heart of the mortgage crisis, and was heavily involved in
lending to already indebted borrowers through its refinance and second lien businesses.
